The prospect of good barley crops around the world is weighing down the price outlook for malting barley.
Australia, Europe and North America are all experiencing good growing conditions, which could result in generous supplies of high quality barley on world markets this year.
“The three major growing areas for malting barley are looking pretty good, so that’s putting pressure on our price expectations for the coming year,” said CWB grain market analyst Peter Watts.
“The price outlook is being supply driven.”
The board last week reduced its 2004-05 monthly pool return outlook for designated barley by $3-$4 a tonne, or seven to nine cents a bushel.
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The new PRO for standard select Canada western two-row is $187 a tonne, while SS CW six-row is $174 a tonne.
That’s down about seven percent from the returns expected in the current year. The final PRO for 2003-04 projected prices of $200 a tonne for SS CS two-row and $187 for SS CW six-row.
Prices are basis export position. Freight and handling charges should be deducted to arrive at local prices.
In Australia, recent rains during the planting season have boosted the outlook for the two-row malting barley crop. Australia, Canada’s main competitor for sales to China, is the biggest swing factor on the supply side of the world malting barley market, with annual production ranging from 500,000-1.5 million tonnes depending on weather.
Production prospects in Europe are markedly better than last year, although conditions are dry in Denmark, a major producer.
Last year barley prices – both feed and malting – were supported by a shortage of feed grains in Europe.
“This year, without that, you’ll see more pressure on malting barley,” said Watts, adding that Ukraine and Russia are selling feed barley at low prices, which is dragging down world prices.
Decent rainfall in North American barley growing regions also suggest there will plentiful supplies in both Canada and the United States this year. The potential problem is whether the moist conditions could lead to disease problems, including fusarium in Manitoba, eastern Saskatchewan and North Dakota.
Jack Foster, director of grain procurement for Prairie Malt Ltd. of Biggar, Sask., said that while plant disease, grasshoppers and the possibility of a late harvest are all potential concerns, the malting industry is generally optimistic about prospects for the 2005 crop.
“It’s a mixed bag, but overall we’ve got a better feeling right now than we’ve had the last five years,” he said.
“Barley loves cool weather so this is a positive and hopefully it will be worth waiting for.”
He said the industry wouldn’t mind seeing a repeat of 1986-87, when cool weather carried on through July, then a hot August allowed the crop to be taken off with good yields and low protein.
In the last few years, hot dry growing seasons have resulted in high protein levels in barley, an undesirable trait for maltsters.
On the demand side, the combination of lower prices and reduced ocean freight rates should result in increased purchases by China, which bought 1.6 million tonnes in 2002-03, down from normal import levels of around two million.
China’s production and consumption of beer have continued to grow despite the negative impacts of SARS on the domestic economy. Domestic sales of beer actually increased by six percent from 2002 to 2003, contrary to many predictions.
